The naira remained under pressure and fell across the foreign exchange (forex) markets as skepticism continued to fuel foreign inflows into the market.
Official data and trading reports by finance houses indicated that naira depreciated at both the official Investors and Exporters (I & E) window and the parallel market.
At the official I & E window, the naira depreciated by 0.07 per cent to N416.63 per dollar. At the parallel market, where most manufacturers and private retail users source forex, the naira fell by 0.20 per cent to N588 per dollar at the weekend.
However, at the Interbank Foreign Exchange market, the naira closed flat at N430 per dollar amid Central Bank of Nigeria (CBN)’s weekly injections of$210 million.
The apex bank, as usual, allocated $100 million to Wholesale Secondary Market Intervention Sales (SMIS) and $55 million each to Small and Medium Scale Enterprises and invisibles.
Most analysts expected further devaluation in the value of naira, despite the apex bank’s efforts to moderate the exchange rate.
Analysts at FSDH said they expected the official exchange rate to depreciate to N430 per dollar this year.
Analysts at Cowry Asset Management said there would be “some level of pressure on the naira against the dollar as investors convert their assets to dollar-denominated assets amid heightened uncertainty”.
Cordros Capital stated that “further adjustments in the naira-dollar peg closer to its fair value and flexibility in the exchange rate” would be significant in attracting much-needed foreign inflows that could help bolster the domestic currency.
A two-week review by Bismarck Rewane’s Financial Derivatives Company (FDC) at the weekend showed that the naira fell sharply to N600 per dollar at the parallel market before recovering mildly to close at N586 per dollar by March 29, 2022. Compared to the close of the preceding period at N580 per dollar, the currency lost 1.03 per cent and it has depreciated by 4.09 per cent so far this year.
FDC noted that forex demand has continued to outweigh supply despite higher global oil prices, hovering around $114.38 per barrel. The average daily forex turnover rose marginally by 9.17 per cent to $130.30 million from $119.36 million in the first half of last year.
Gross external reserves declined consistently from March 16 to 23, before increasing by 0.03 per cent to close the period at $39.53 billion. Import cover is down 0.44 per cent to 8.97 months from 9.01 at the beginning of the review period.
“We expect currency pressures to persist on the back of low forex inflows due to dwindling oil production level. The parallel market rate could continue to languish until supply in-creases and there is a change in market fundamentals” FDC stated.